Resources
• THOMAS
• CONGRESSIONAL BILLS
• PENSION COUNSELING PROJECTS
The Pension Protection Act & the National Employee Savings and Trust Equity Act (NESTEG)
September 2005:
Legislation currently being considered by Congress would make some substantial changes to how pensions are governed and protected. The plan in the House of Representatives is H.R. 2830, “The Pension Protection Act.” The Senate plan is S. 219, “The National Employee Savings and Trust Equity Act” (or “NESTEG.”)
The changes will undoubtedly make a difference. They should keep all employees better informed about the health of their pension, and also improve financial disclosure.
But other intended effects of these changes will be unevenly felt, much more so in some industries (those with Single Employer Plans) than in others (those with Multi Employer Plans).
For Single Employer Plans (sometimes called “Company Plans” – a reference to the fact that employing companies typically have control of most plan decisions), the proposed changes introduce new funding requirements designed to give employers incentives to adequately fund pensions, and to speed up contributions to underfunded plans.
Both plans include measures that seek to restore financial health to the Pension Benefit Guaranty Corporation by increasing annual insurance premiums paid by pension plans.
The House plan includes a structure for identifying Multi Employer Plans that are in trouble, using a “Red, Yellow and Green” rating system. But some critics have suggested that the leading Congressional proposals fall short when it comes to the important question of “orphans” in Multi Employer Plans – workers in plans where companies have either gone bankrupt or made promises to employees they are in no position to keep. Multi Employer Plans are sometimes referred to as “Union Plans” because they are more often than not controlled by union leaders.
The Pension Funding Equity Act
April 2004:
President Bush signed into law the Pension Funding Equity Act of 2004, which is expected to save American companies around $80 billion in pension contributions through the end of 2005. The bill was designed to help companies struggling to pay pensions following the weak stock market over the past several years.
The law will relieve 31,000 companies covering 35 million workers who have traditional “defined benefit” pension plans. It does not provide relief through government payments. Rather, it allows companies to use a different formula to their calculate pension contributions.
The bill provides an additional $1.6 billion in extra relief for some steel companies and major airlines. But the legislation contains less help for companies with multi-employer plans, such as those covering union workers in the construction and trucking industries. Less than 4 percent of the 16,000 multi-employer plans qualify for the pension relief, according to Sen. Edward Kennedy (D-Mass.).
However, for workers with defined benefit multiemployer plans, the new law requires plan administrators to communicate more directly with employees about the state of their pension funds. If workers’ pensions are at risk of being underfunded, plan administrators must now inform the plan participants.
Administrators must send yearly notices to all members of the pension plan. These annual updates must be written in language that the average person can understand. They must also be easily accessible – whether in electronic or hard copy format.
The annual notices must include the following information:
A phone number for the plan’s administrator, its main administrative officer, the employee’s plan number and the employer’s identification number.
A statement as to whether the plan's funded current liability percentage for the plan year to which the notice relates is at least 100 percent (and, if not, the actual percentage).
A statement of the value of the plan's assets, the amount of benefit payments, and the ratio of the assets to the payments for the plan year to which the notice relates.
A summary of the rules governing insolvent multiemployer plans, including the limitations on benefit payments and any potential benefit reductions and suspensions (and the potential effects of such limitations, reductions, and suspensions on the plan).
A general description of the benefits under the plan which are eligible to be guaranteed by the Pension Benefit Guaranty Corporation, along with an explanation of the limitations on the guarantee and the circumstances under which such limitations apply.
If plan administrators fail to provide plan members with these updates, they will be held accountable by the Department of Labor. |
